By Meghan Hall
Traditionally, property owners only received overviews of their capital planning initiatives on a quarterly basis, making it difficult to accurately track capital flows across their portfolios. By the time these numbers reached investors, they were often out of date and inaccurate, impacting how commercial real estate professionals made investment decisions. According to Riggs Kubiak, chief executive officer and founder of Honest Buildings, a project management and accounting platform, how commercial real estate professionals approach their finances will change as technology continues to cater specifically to property owners — for the better.
Honest Buildings is a capital planning and project management platform that specifically caters to real estate owners. How did your experience in the real estate industry impact your decision to create Honest Buildings?
About 10 years before founding Honest Buildings, I started my career in commercial real estate finance, focused almost exclusively on the transactional elements of real estate; pure-play getting deals done via acquisitions and dispositions. I spent nearly 10 years focused on transactions and asset management of large commercial buildings between my roles at Ernst & Young, Granite Partners (now Savills) and Tishman Speyer.
During this time, it became increasingly hard for me to believe that the nearly $12 trillion spent on construction each year continued to rely upon analog processes that hadn’t been updated in decades. So, I made it my personal mission to change the industry.
Partnering with a few early adopters who happened to be some of the largest owners in the world, and recruiting team members with real estate, finance and software experience, Honest Buildings was born and quickly began to multiply.
This perspective of software built for owners gave early adopters control and insight over their entire portfolio, reaping instant results and [giving them] a vision of how much data could affect the way they run their businesses in the future. Owners eagerly seized onto the new concept of technology built for owners, by owners. Today, our team and product suite provide unprecedented transparency and collaboration, speed to project completion and cost savings not only for the largest real estate owners in the world, but also some of today’s fastest growing companies who are deploying significant capital into buildings.
What did traditional capital planning and project management look like before the creation of Honest Buildings? What other tools and technologies existed to help in these areas? What specific pain points in capital planning and project management were you working through that Honest Buildings seeks to solve?
Real estate owners, developers, and large real estate occupiers deploy capital throughout their portfolios, engaging in an inherently risky, entrepreneurial business, historically done without technology built specifically for them.
For owners, completing projects on time and on budget makes or breaks the underwriting for every asset. For developers, remaining aligned with their capital forecasts is their primary responsibility on behalf of their investors. And, for large corporate occupiers, tracking spending across projects is a point of paramount significance to bottom line performance each year.
Traditionally, capital plans are created based on very rough estimates of project costs. Using Honest Buildings, owners can access historical data from any type of project they have run, enabling more accurate estimates of project costs that can be easily inputted into the capital plan.
Similarly, capital plans traditionally are compared to actualized projects of an asset every three to six months and take a huge amount of administrative time to aggregate multiple data points within that time period. When running individual projects with real-time cost data and capital plans in one platform, manual data aggregation is eliminated and capital plans can be kept up to date in real-time.
The ability to understand the execution of a capital plan in real-time unlocks the most accurate understanding of the total value of an asset at any given time.
Have you found traditional capital planning and project management methods to be inaccurate in the real estate industry? If so, by how much?
Not inaccurate, but traditionally results have looked like a giant game of phone tag to get information, a huge drag on a team’s time, often at the expense of higher-value tasks, and stale, limited insights leading to sluggish returns for investors. Even when plans were updated regularly, e.g., quarterly, as soon as updates were complete, the data was still out-of-date by the time it reached investors.
Construction costs and timelines in major markets such as San Francisco and the Puget Sound are often widely variable; how does Honest Buildings’ technology work to create streamlined — and accurate — workflows?
We believe that owners take all the capital risk on projects, and they should have the absolute best technology built specifically for them to get these projects completed on time and on budget.
The sophistication of these purpose-built platforms has been a real game changer for owners in terms of increasing productivity — and ultimately increasing returns for investors.
- For example, Brookfield Property Partners, one of our investors and a user of the platform, estimates that Honest Buildings has reduced the cost of a typical capital project by 6.3 percent and cut administrative labor by 80percent, or 18 hours from 92 hours.
- Brookfield’s EVP of US Operations, Dan Kindbergh, has found that the creation of a “digitized, automated bidding and capital project management” system, has helped enable their property management team to become more efficient and spend less time stuck in the outdated previous processes.
- Michael Fransen, SVP & Managing Director at Parkway, Inc., says utilizing Honest Buildings for the bidding and tracking of each project has resulted in up to a 20 percent reduction in time to build out the spaces, which has given them considerable competitive advantage in securing tenants at their assets.
Why did Honest Buildings elect to improve its platform by integrating with MRI Software? What does MRI Software bring to Honest Platforms that the technology was unable to offer before?
We see the future of real estate technology being built upon an open and connected ecosystem that allows owners the freedom to harness best-in-class platforms and have them work effortlessly with their existing technology solutions. Asset managers, project managers and property managers can be driving project performance within Honest Buildings with real-time connectivity to their accounting data.
Aligned with our global growth strategy, two-way integration with MRI Software centralizes all projects portfolio-wide and moves workflows out of spreadsheets, allowing owners to more comprehensively harness data and manage capital more strategically.
In October 2018, JLL Spark was named as a strategic investor for Honest Buildings, bringing total investment to $50MM raised by the platform. How will Honest Buildings use the funds to refine its technology and its services?
The investment from JLL Spark has allowed us to invest further in the Honest Buildings product and our team so we can continue to scale our impact. Additionally, we are looking to further expand globally, starting with Australia and the United Kingdom.